Howard Wheeldon wasn't too impressed with 'Mr 12%'...
Here’s a nice name that we might soon be remembering Alistair Darling by – Mr 12% – a reference to the probability that by the time he will likely leave the office of Chancellor in just a few weeks time the UK budget deficit will be standing at 12% of GDP! Meanwhile when it comes to the actual budget itself it seems that there will be no Cider with Rosie at Number 11 this year! At the practical level there is probably nothing that will greatly upset markets but then, nothing to particularly cheer. However, note that there was not one jot of detail on new government spending cuts bar confirmation of what we already knew in terms of curbing public sector pay awards. That suggests to me that even if dribs and drabs of departmental spending cuts start to drop out over the next few days and weeks the real plan behind this budget is simply that should Messrs Brown and Darling perchance by accident or even design find themselves re-elected there would need to be yet another budget in less than three months time.
So, as to this being a credible budget read quite the opposite. As to this being a principled budget the answer to that is certainly no. Could this possibly be seen as a budget that might inspire those that are supposed to lend to Britain to lend more? I doubt that it was. Sure, as tax receipts have been higher than expected at least borrowing targets have been reduced as a result but we knew that already. And it does appear to be true that Mr. Darling would appear to have decided to put some of this windfall away for a rainy day though I guess not nearly enough. Don’t be taken in though – just because 2009/10 and 2010/11 borrowing targets have been reduced by just a touch should not be taken to mean that they are still not extremely high at £167bn for this fiscal year and £163bn for next. Don’t forget either that in 2013/14 the budget deficit will be running at around £70bn – still way above the officially agreed 3% GDP target that the UK has committed itself too. Skilfully thought out this budget probably was but for all the wrong reasons and wrong results. Indeed, I would say that Mr. Darling has delivered a budget that while on one hand sounding great was in fact writ in completely the wrong language. For save and pay down it said borrow and spend. For prudence it said that only politics and play matters. A budget whose best aspect – the slightly lower than anticipated borrowing requirement – has been made possible by an accident as opposed to design.
This was a budget that while providing few shocks will do nothing to further the cause of either new Labour or Britain. Yes, I welcome the help for small and medium sized enterprise and even the green bank. There are other things I might welcome too such as anything to do with tax avoidance if I could believe them. No, this was a duplicitous budget of spin that sadly lacked the economic policy diversity and yet was brimming over the top with political goodies and niceties. An opportunity lost and one that David Cameron was easily able to seize by the scruff of the neck and shake down.
Howard Wheeldon, Senior Strategist at BGC Brokers
